IRS Late Fees & Penalties

by Mike Parker

The IRS charges interest on late tax payments.

Your federal income tax return is due by April 15 each year, unless the 15th falls on a weekend or holiday, in which case you have until the next business day. You can request an automatic extension to file, but there's no extension when it comes to paying any taxes you owe. If you're late, get ready to pay fees and penalties.

Late Filing Penalty

You need to file your federal income tax return by the due date, or at least request an extension. Otherwise, the IRS automatically assesses a late-filing penalty, usually 5 percent of the amount of unpaid taxes, for every month or part of a month that you are late, up to 25 percent. If you let it go for 60 days, your minimum late-filing penalty as of December 2011 would be the smaller of $135 or 100 percent of your unpaid taxes -- and you still have to pay your overdue taxes.

Late Payment Penalty

If you file your tax return on time, but you don't have the money to pay your tax bill in full, you should pay as much as you can to avoid penalties and interest. The late payment penalty is 0.5 percent of the amount of taxes owed for each month or part of a month that your taxes are not paid in full, for a maximum late-payment penalty of 25 percent.

Late Payment Interest

On top of the late-filing penalty and the late-payment penalty, you will also get hit with interest on your unpaid tax bill. The IRS usually charges interest at the federal short-term rate plus 3 percent on any amount that remains unpaid from the due date until the date your payment is received. The interest rate is adjusted quarterly, and the interest on your tax debt is compounded daily.

Considerations

If the IRS owes you a tax refund, there's no penalty for filing late, but you're giving the government an interest-free loan of your money. You can still get your refund by filing a late return, as long as you file during the grace period, which is typically three years.

Resources

About the Author

Mike Parker is a full-time writer, publisher and independent businessman. His background includes a career as an investments broker with such NYSE member firms as Edward Jones & Company, AG Edwards & Sons and Dean Witter. He helped launch DiscoverCard as one of the company's first merchant sales reps.